FIRST DIVISION

[G.R. No. 170865. April 25, 2012.]

PHILIPPINE NATIONAL BANK , petitioner, vs . SPOUSES CHEAH CHEE

CHONG and OFELIA CAMACHO CHEAH , respondents.

[G.R. No. 170892. April 25, 2012.]

SPOUSES CHEAH CHEE CHONG and OFELIA CAMACHO CHEAH ,

petitioners, vs. PHILIPPINE NATIONAL BANK , respondent.

DECISION

DEL CASTILLO , J : p

Law favoreth diligence, and therefore, hateth folly and negligence. —

Wingate's Maxim.
In doing a friend a favor to help the latter's friend collect the proceeds of a foreign
check, a woman deposited the check in her and her husband's dollar account. The local
bank accepted the check for collection and immediately credited the proceeds thereof to
said spouses' account even before the lapse of the clearing period. And just when the
money had been withdrawn and distributed among different bene ciaries, it was
discovered that all along, to the horror of the woman whose intention to accommodate a
friend's friend backfired, she and her bank had dealt with a rubber check.
These consolidated 1 Petitions for Review on Certiorari led by the Philippine
National Bank (PNB) 2 and by the spouses Cheah Chee Chong and Ofelia Camacho Cheah
(spouses Cheah) 3 both assail the August 22, 2005 Decision 4 and December 21, 2005
Resolution 5 of the Court of Appeals (CA) in CA-G.R. CV No. 63948 which declared both
parties equally negligent and, hence, should equally suffer the resulting loss. For its part,
PNB questions why it was declared blameworthy together with its depositors, spouses
Cheah, for the amount wrongfully paid the latter, while the spouses Cheah lead that they be
declared entirely faultless.
Factual Antecedents
On November 4, 1992, Ofelia Cheah (Ofelia) and her friend Adelina Guarin (Adelina)
were having a conversation in the latter's o ce when Adelina's friend, Filipina Tuazon
(Filipina), approached her to ask if she could have Filipina's check cleared and encashed
for a service fee of 2.5%. The check is Bank of America Check No. 190 6 under the account
of Alejandria Pineda and Eduardo Rosales and drawn by Atty. Eduardo Rosales against
Bank of America Alhambra Branch in California, USA, with a face amount of $300,000.00,
payable to cash. Because Adelina does not have a dollar account in which to deposit the
check, she asked Ofelia if she could accommodate Filipina's request since she has a joint
dollar savings account with her Malaysian husband Cheah Chee Chong (Chee Chong) under
Account No. 265-705612-2 with PNB Buendia Branch.

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 Ofelia agreed.
That same day, Ofelia and Adelina went to PNB Buendia Branch. They met with
Perfecto Mendiola of the Loans Department who referred them to PNB Division Chief
Alberto Garin (Garin). Garin discussed with them the process of clearing the subject check
and they were told that it normally takes 15 days. 7 Assured that the deposit and
subsequent clearance of the check is a normal transaction, Ofelia deposited Filipina's
check. PNB then sent it for clearing through its correspondent bank, Philadelphia National
Bank. Five days later, PNB received a credit advice 8 from Philadelphia National Bank that
the proceeds of the subject check had been temporarily credited to PNB's account as of
November 6, 1992. On November 16, 1992, Garin called up Ofelia to inform her that the
check had already been cleared. 9 The following day, PNB Buendia Branch, after deducting
the bank charges, credited $299,248.37 to the account of the spouses Cheah. 1 0 Acting on
Adelina's instruction to withdraw the credited amount, Ofelia that day personally withdrew
$180,000.00. 1 1 Adelina was able to withdraw the remaining amount the next day after
having been authorized by Ofelia. 1 2 Filipina received all the proceeds.
IcSADC

In the meantime, the Cable Division of PNB Head O ce in Escolta, Manila received
on November 16, 1992 a SWIFT 1 3 message from Philadelphia National Bank dated
November 13, 1992 with Transaction Reference Number (TRN) 46506218, informing PNB
of the return of the subject check for insu cient funds. 1 4 However, the PNB Head O ce
could not ascertain to which branch/o ce it should forward the same for proper action.
Eventually, PNB Head O ce sent Philadelphia National Bank a SWIFT message informing
the latter that SWIFT message with TRN 46506218 has been relayed to PNB's various
divisions/departments but was returned to PNB Head O ce as it seemed misrouted. PNB
Head O ce thus requested for Philadelphia National Bank's advice on said SWIFT
message's proper disposition. 1 5 After a few days, PNB Head O ce ascertained that the
SWIFT message was intended for PNB Buendia Branch.
PNB Buendia Branch learned about the bounced check when it received on
November 20, 1992 a debit advice, 1 6 followed by a letter 1 7 on November 24, 1992, from
Philadelphia National Bank to which the November 13, 1992 SWIFT message was
attached. Informed about the bounced check and upon demand by PNB Buendia Branch to
return the money withdrawn, Ofelia immediately contacted Filipina to get the money back.
But the latter told her that all the money had already been given to several people who
asked for the check's encashment. In their effort to recover the money, spouses Cheah
then sought the help of the National Bureau of Investigation. Said agency's Anti-Fraud and
Action Division was later able to apprehend some of the bene ciaries of the proceeds of
the check and recover from them $20,000.00. Criminal charges were then led against
these suspect beneficiaries. 1 8
Meanwhile, the spouses Cheah have been constantly meeting with the bank o cials
to discuss matters regarding the incident and the recovery of the value of the check while
the cases against the alleged perpetrators remain pending. Chee Chong in the end signed
a PNB drafted 1 9 letter 2 0 which states that the spouses Cheah are offering their
condominium units as collaterals for the amount withdrawn. Under this setup, the amount
withdrawn would be treated as a loan account with deferred interest while the spouses try
to recover the money from those who defrauded them. Apparently, Chee Chong signed the
letter after the Vice President and Manager of PNB Buendia Branch, Erwin Asperilla
(Asperilla), asked the spouses Cheah to help him and the other bank o cers as they were
in danger of losing their jobs because of the incident. Asperilla likewise assured the
spouses Cheah that the letter was a mere formality and that the mortgage will be
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 disregarded once PNB receives its claim for indemnity from Philadelphia National Bank.
Although some of the o cers of PNB were amenable to the proposal, 2 1 the same
did not materialize. Subsequently, PNB sent a demand letter to spouses Cheah for the
return of the amount of the check, 2 2 froze their peso and dollar deposits in the amounts of
P275,166.80 and $893.46, 2 3 and led a complaint 2 4 against them for Sum of Money with
Branch 50 of the Regional Trial Court (RTC) of Manila, docketed as Civil Case No. 94-
71022. In said complaint, PNB demanded payment of around P8,202,220.44, plus
interests 2 5 and attorney's fees, from the spouses Cheah.
As their main defense, the spouses Cheah claimed that the proximate cause of
PNB's injury was its own negligence of paying a US dollar denominated check without
waiting for the 15-day clearing period, in violation of its bank practice as mandated by its
own bank circular, i.e., PNB General Circular No. 52-101/88. 2 6 Because of this, spouses
Cheah averred that PNB is barred from claiming what it had lost. They further averred that
it is unjust for them to pay back the amount disbursed as they never really bene ted
therefrom. As counterclaim, they prayed for the return of their frozen deposits, the
recoupment of P400,000.00 representing the amount they had so far spent in recovering
the value of the check, and payment of moral and exemplary damages, as well as
attorney's fees. DTIcSH

Ruling of the Regional Trial Court

The RTC ruled in PNB's favor. The dispositive portion of its Decision 27 dated May
20, 1999 reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff Philippine National Bank [and] against defendants Mr. Cheah Chee
Chong and Ms. Ofelia Camacho Cheah, ordering the latter to pay jointly and
severally the herein plaintiffs' bank the amount:

1. of US$298,950.25 or its peso equivalent based on Central Bank

Exchange Rate prevailing at the time the proceeds of the BA Check No. 190 were
withdrawn or the prevailing Central Bank Rate at the time the amount is to be
reimbursed by the defendants to plaintiff or whatever is lower. This is without
prejudice however, to the rights of the defendants (accommodating parties) to go
against the group of Adelina Guarin, Atty. Eduardo Rosales, Filipina Tuazon, etc.,
(Beneficiaries-accommodated parties) who are privy to the defendants.
No pronouncement as to costs.
No other award of damages for non[e] has been proven.

SO ORDERED. 2 8

The RTC held that spouses Cheah were guilty of contributory negligence. Because
Ofelia trusted a friend's friend whom she did not know and considering the amount of the
check made payable to cash, the RTC opined that Ofelia showed lack of vigilance in her
dealings. She should have exercised due care by investigating the negotiability of the
check and the identity of the drawer. While the court found that the proximate cause of the
wrongful payment of the check was PNB's negligence in not observing the 15-day
guarantee period rule, it ruled that spouses Cheah still cannot escape liability to reimburse
PNB the value of the check as an accommodation party pursuant to Section 29 of the
Negotiable Instruments Law. 2 9 It likewise applied the principle of solutio indebiti under
the Civil Code. With regard to the award of other forms of damages, the RTC held that each
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 party must suffer the consequences of their own acts and thus left both parties as they
are.
Unwilling to accept the judgment, the spouses Cheah appealed to the CA.
Ruling of the Court of Appeals
While the CA recognized the spouses Cheah as victims of a scam who nevertheless
have to suffer the consequences of Ofelia's lack of care and prudence in immediately
trusting a stranger, the appellate court did not hold PNB scot-free. It ruled in its August 22,
2005 Decision, 3 0 viz.:
As both parties were equally negligent, it is but right and just that both
parties should equally suffer and shoulder the loss. The scam would not have
been possible without the negligence of both parties. As earlier stated, the
complaint of PNB cannot be dismissed because the Cheah spouses were
negligent and Ms. Cheah took an active part in the deposit of the check and the
withdrawal of the subject amounts. On the other hand, the Cheah spouses cannot
entirely bear the loss because PNB allowed her to withdraw without waiting for
the clearance of the check. The remedy of the parties is to go after those who
perpetrated, and benefited from, the scam.
WHEREFORE, the May 20, 1999 Decision of the Regional Trial Court,
Branch 5, Manila, in Civil Case No. 94-71022, is hereby REVERSED and SET ASIDE
and another one entered DECLARING both parties equally negligent and should
suffer and shoulder the loss.

Accordingly, PNB is hereby ordered to credit to the peso and dollar

accounts of the Cheah spouses the amount due to them.

SO ORDERED. 3 1 CAaEDH

In so ruling, the CA ratiocinated that PNB Buendia Branch's non-receipt of the SWIFT
message from Philadelphia National Bank within the 15-day clearing period is not an
acceptable excuse. Applying the last clear chance doctrine, the CA held that PNB had the
last clear opportunity to avoid the impending loss of the money and yet, it glaringly
exhibited its negligence in allowing the withdrawal of funds without exhausting the 15-day
clearing period which has always been a standard banking practice as testi ed to by
PNB's own o cers, and as provided in its own General Circular No. 52/101/88. To the CA,
PNB cannot claim from spouses Cheah even if the latter are accommodation parties under
the law as the bank's own negligence is the proximate cause of the damage it sustained.
Nevertheless, it also found Ofelia guilty of contributory negligence. Thus, both parties
should be made equally responsible for the resulting loss.
Both parties led their respective Motions for Reconsideration 3 2 but same were
denied in a Resolution 3 3 dated December 21, 2005.
Hence, these Petitions for Review on Certiorari.
Our Ruling
The petitions for review lack merit. Hence, we affirm the ruling of the CA.
PNB's act of releasing the proceeds of
the check prior to the lapse of the 15-day
clearing period was the proximate cause
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 of the loss.
"Proximate cause is 'that cause, which, in natural and continuous sequence,
unbroken by any e cient intervening cause, produces the injury and without which the
result would not have occurred.' . . . To determine the proximate cause of a controversy,
the question that needs to be asked is: If the event did not happen, would the injury have
resulted? If the answer is no, then the event is the proximate cause." 3 4DTAHEC

Here, while PNB highlights Ofelia's fault in accommodating a stranger's check and
depositing it to the bank, it remains mum in its release of the proceeds thereof without
exhausting the 15-day clearing period, an act which contravened established banking rules
and practice.
It is worthy of notice that the 15-day clearing period alluded to is construed as 15
banking days. As declared by Josephine Estella, the Administrative Service O cer who
was the bank's Remittance Examiner, what was unusual in the processing of the check was
that the "lapse of 15 banking days was not observed." 3 5 Even PNB's agreement with
Philadelphia National Bank 3 6 regarding the rules on the collection of the proceeds of US
dollar checks refers to "business/banking days." Ofelia deposited the subject check on
November 4, 1992. Hence, the 15th banking day from the date of said deposit should fall
on November 25, 1992. However, what happened was that PNB Buendia Branch, upon
calling up Ofelia that the check had been cleared, allowed the proceeds thereof to be
withdrawn on November 17 and 18, 1992, a week before the lapse of the standard 15-day
clearing period.
This Court already held that the payment of the amounts of checks without
previously clearing them with the drawee bank especially so where the drawee bank is a
foreign bank and the amounts involved were large is contrary to normal or ordinary
banking practice. 3 7 Also, in Associated Bank v. Tan , 3 8 wherein the bank allowed the
withdrawal of the value of a check prior to its clearing, we said that "[b]efore the check
shall have been cleared for deposit, the collecting bank can only 'assume' at its own risk . . .
that the check would be cleared and paid out." The delay in the receipt by PNB Buendia
Branch of the November 13, 1992 SWIFT message notifying it of the dishonor of the
subject check is of no moment, because had PNB Buendia Branch waited for the expiration
of the clearing period and had never released during that time the proceeds of the check, it
would have already been duly noti ed of its dishonor. Clearly, PNB's disregard of its
preventive and protective measure against the possibility of being victimized by bad
checks had brought upon itself the injury of losing a significant amount of money.
It bears stressing that "the diligence required of banks is more than that of a Roman
paler familias or a good father of a family. The highest degree of diligence is expected." 3 9
PNB miserably failed to do its duty of exercising extraordinary diligence and reasonable
business prudence. The disregard of its own banking policy amounts to gross negligence,
which the law de nes as "negligence characterized by the want of even slight care, acting
or omitting to act in a situation where there is duty to act, not inadvertently but wilfully and
intentionally with a conscious indifference to consequences in so far as other persons may
be affected." 4 0 With regard to collection or encashment of checks, su ce it to say that
the law imposes on the collecting bank the duty to scrutinize diligently the checks
deposited with it for the purpose of determining their genuineness and regularity. "The
collecting bank, being primarily engaged in banking, holds itself out to the public as the
expert on this eld, and the law thus holds it to a high standard of conduct." 4 1 A bank is
expected to be an expert in banking procedures and it has the necessary means to
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 ascertain whether a check, local or foreign, is sufficiently funded.
Incidentally, PNB obliges the spouses Cheah to return the withdrawn money under
the principle of solutio indebiti, which is laid down in Article 2154 of the Civil Code: 4 2
Art. 2154. If something is received when there is no right to demand it,
and it was unduly delivered through mistake, the obligation to return it arises.

"[T]he indispensable requisites of the juridical relation known as solutio indebiti, are,
(a) that he who paid was not under obligation to do so; and (b) that the payment was made
by reason of an essential mistake of fact. 4 3
In the case at bench, PNB cannot recover the proceeds of the check under the
principle it invokes. In the rst place, the gross negligence of PNB, as earlier discussed,
can never be equated with a mere mistake of fact, which must be something excusable
and which requires the exercise of prudence. No recovery is due if the mistake done is one
of gross negligence. DICcTa

The spouses Cheah are guilty of

contributory negligence and are bound
to share the loss with the bank
"Contributory negligence is conduct on the part of the injured party, contributing as a
legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection." 4 4
The CA found Ofelia's credulousness blameworthy. We agree. Indeed, Ofelia failed to
observe caution in giving her full trust in accommodating a complete stranger and this led
her and her husband to be swindled. Considering that Filipina was not personally known to
her and the amount of the foreign check to be encashed was $300,000.00, a higher degree
of care is expected of Ofelia which she, however, failed to exercise under the
circumstances. Another circumstance which should have goaded Ofelia to be more
circumspect in her dealings was when a bank o cer called her up to inform that the Bank
of America check has already been cleared way earlier than the 15-day clearing period. The
fact that the check was cleared after only eight banking days from the time it was
deposited or contrary to what Garin told her that clearing takes 15 days should have
already put Ofelia on guard. She should have rst veri ed the regularity of such hasty
clearance considering that if something goes wrong with the transaction, it is she and her
husband who would be put at risk and not the accommodated party. However, Ofelia
chose to ignore the same and instead actively participated in immediately withdrawing the
proceeds of the check. Thus, we are one with the CA in ruling that Ofelia's prior
consultation with PNB o cers is not enough to totally absolve her of any liability. In the
first place, she should have shunned any participation in that palpably shady transaction.
In any case, the complaint against the spouses Cheah could not be dismissed. As
PNB's client, Ofelia was the one who dealt with PNB and negotiated the check such that its
value was credited in her and her husband's account. Being the ones in privity with PNB, the
spouses Cheah are therefore the persons who should return to PNB the money released to
them.
All told, the Court concurs with the ndings of the CA that PNB and the spouses
Cheah are equally negligent and should therefore equally suffer the loss. The two must
both bear the consequences of their mistakes.

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 WHEREFORE , premises considered, the Petitions for Review on Certiorari in G.R.
No. 170865 and in G.R. No. 170892 are both DENIED . The assailed August 22, 2005
Decision and December 21, 2005 Resolution of the Court of Appeals in CA-G.R. CV No.
63948 are hereby AFFIRMED in toto .
SO ORDERED .
Corona, C.J., Leonardo-de Castro, Bersamin and Villarama, Jr., JJ., concur.

Footnotes

1.Consolidated pursuant to our Resolution dated April 26, 2006, rollo (G.R. No. 170865), p. 392
and rollo (G.R. No. 170892), p. 95.

2.Docketed as G.R. No. 170865, rollo, pp. 105-129.

3.Docketed as G.R. No. 170892, id. at 11-39.
4.CA rollo, pp. 172-188; penned by Associate Justice Jose Catral Mendoza (now a member of
this Court) and concurred in by Presiding Justice Romeo A. Brawner and Associate
Justice Mario L. Guariña III.

5.Id. at 261; penned by Associate Justice Jose Catral Mendoza and concurred in by Associate
Justices Mario L. Guariña III and Celia C. Librea-Leagogo.

6.Records, p. 199.
7.TSN, July 3, 1998, pp. 14-17.
8.Records, p. 200.
9.TSN, July 3, 1998, pp. 18-19; July 24, 1998, pp. 32-33.
10.Records, pp. 201 and 425.

11.Id. at 202.
12.Id. at 206.
13.Stands for 'Society for Worldwide Interbank Financial Telecommunication.' It is an
international transaction processing system owned by and serving the financial
community worldwide. It handles financial messages such as: a. customer transfers or
payment orders; b. bank transfers; c. foreign exchange confirmation; d. debit
confirmation; e. credit confirmation; f. statement of account; g. collections; h.
documentary credits; i. syndications; j. traveler's checks; See Joint Affidavit of Gregorio
SC Termulo and Leoncio M. David, Assistant Department Manager II and Division Chief
III of the Cable Division, International Department of PNB, id. at 312-315.
14.Id. at 316.

15.Id. at 317.
16.Id. at 384.
17.Id. at 386-387.
18.Based on the records of the case at bar, upon the NBI's investigation, the withdrawn money
was divided among Transmedian Management (Adelina Guarin's office), Nilo
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 Montalban, Patricio Valleser, and Lucresio Semblante, who all received a part of the
proceeds as commissions, while the rest of the amount was divided between Felix Sajot
and Eduardo Rosales, id. at 276-277. The NBI, suspecting a conspiracy among the bank
officers and the beneficiaries, filed an estafa case against Adelina Guarin and PNB
officials Lorenzo Bal, Ponciano Felix, Teresita Gregorio, and Domingo Posadas before
the Office of the Ombudsman, but this was dismissed, id. at 402-407. Criminal case for
estafa was likewise filed by the Makati Prosecutor against Filipina Tuazon, Nilo
Montalban, Patricio Vallaser, Lucresio Semblante, Eduardo Rosales and Felix Sajot
before the Regional Trial Court of Makati, id. at 426-427.
19.TSN, July 3, 1998, pp. 43-48; July 24, 1998, p. 9.
20.Records, pp. 207-208.

21.Id. at 388-395.
22.Id. at 399.
23.Under Account Nos. 265-560184-0 and 265-705612-2.
24.Records, pp. 1-9.
25.Converted to peso at a rate of $1 = P27.695. The amount recovered was deducted from the
$300,000, then computed at an interest rate of 7.5% per annum.
26.Said Circular dated August 31, 1988, states:

The existing cash letter services of our foreign correspondents [sic] bank make it
possible for PNB to obtain immediate credit, subject to final payment for US dollar
denominated checks withdrawn on banks in the U.S.A. negotiated with us by clients. The
guarantee period 'and' notice of non-payment by telex features under such clearing item
is made known to PNB within 15 days from date of receipts of checks by our collecting
agent bank. Records, p. 525 as incorporated in the RTC Decision, p. 20.
27.Id. at 506-541; penned by Judge Urbano Victorio, Sr.

28.Id. at 540-541.
29.Sec. 29. Liability of accommodation party. — An accommodation party is one who has
signed the instrument as maker, drawer, acceptor, or indorser, without receiving value
therefor, and for the purpose of lending his name to some other person. Such a person is
liable on the instrument to a holder for value, notwithstanding such holder, at the time of
taking the instrument, knew him to be only an accommodation party.
30.Supra note 4.
31.CA rollo, pp. 187-188.
32.See PNB's Motion for Reconsideration, id. at 194-207 and the spouses Cheah's Motion for
Reconsideration, id. at 208-231.
33.Supra note 5.

34.Allied Banking Corporation v. Lim Sio Wan, G.R. No. 133179, March 27, 2008, 549 SCRA 504,
518.
35.TSN, July 5, 1995, p. 26.

36.Records, pp. 281-285.

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 37.Banco Atlantico v. Auditor General, 171 Phil. 298, 304 (1978).
38.487 Phil. 512, 525 (2004).
39.Philippine Savings Bank v. Chowking Food Corporation, G.R. No. 177526, July 4, 2008, 557
SCRA 318, 330, citing Bank of the Philippine Islands v. Court of Appeals, 383 Phil. 538,
554 (2000); Philippine Bank of Commerce v. Court of Appeals, 336 Phil. 667, 681 (1997)
and Philippine Commercial International Bank v. Court of Appeals, 403 Phil. 361, 388
(2001).
40.Victoriano v. People, G.R. Nos. 171322-24, November 30, 2006, 509 SCRA 483, 493, citing
Fonacier v. Sandiganbayan, G.R. Nos. 50691, 52263, 52766, 52821, 53350, 53397,
53415 and 53520, December 5, 1994, 238 SCRA 655, 687-688.
41.Metropolitan Bank and Trust Company v. Philippine Bank of Communications, G.R. Nos.
141408 and 141429, October 18, 2007, 536 SCRA 556, 563, citing Banco de Oro Savings
and Mortgage Bank v. Equitable Banking Corporation, 241 Phil. 187, 200 (1988).
42.N.B. Solutio indebiti also covers mistake in law under Article 2155 of the Civil Code.
43.City of Cebu v. Judge Piccio, 110 Phil. 558, 563 (1960).
44.Valenzuela v. Court of Appeals, 323 Phil. 374, 388 (1996).

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